I can still remember watching Noam Chomsky ‘s documentary Manufacturing Consent, where he reminds us that a free press is the oxygen of a democracy. Well, the free press is getting less and less “free” each day. The Economist as well as the Financial Times, do an excellent job of finding and reporting the facts. With so much turmoil and volatility in the world right now, we need some truth and reality about what’s going on globally so we all can make smart and well informed decisions. It’s not that I don’t trust the U.S. financial press, it’s just that I feel better if I verify as well. I’ll focus on different parts of the globe, but for this post, I’ll highlight China and the U.S.
ASIA
“Share prices in China have jumped by 30% since November. The most hopeful sign is the surge in bank lending. Medium and long term lending has also increased strongly, suggesting that the government’s stimulus package has started to kick in. Transportation infrastructure spending was already 61% higher than a year earlier.”
“The big banks in China are well funded. Bank’s loan to deposit ratio of 65% is low by global standards; and firms, banks and households have relatively clean balance sheets. This is a country of savers with a lot of money to lend the world.”
Keep your eye on the China and the Asian markets in general from an economic point of view. Some potential options for investing in China’s growth would be the following index funds. This is not an endorsement of any particular fund. Do your homework before investing.
S&P Asia 50 Index Fund (AIA)
FTSE/Xinhua China 25 Index Fund (FXI)
U.S.
“Many of the diehard optimists on Wall Street have been beaten to a pulp by now, but those still standing have fallen back on a nifty bit of calculus. The second derivative, they say, is turning positive. That means that although the economy is spiraling down, it is doing so more slowly”.
“An index compiled by JPMorgan Chase finds that although economic news remains on balance worse than expected, the margin of awfulness has shrunk a bit; the firm’s analysts have marginally trimmed the risk of a “mini-depression”.
Ben Bernanke, our Federal Reserve Chairman and scholar of the Great Depression, talked up the possibility of a recovery starting in 2010 as he testified in front of congress today. If enough people start to believe we’ll see a recovery in 2010, we’ll create a self fulfilling prophecy and we will see what we believe and we’ll see recovery starting.
An index fund that’s worth doing some research on is Vanguard’s Total Stock Market Index Fund. Instead of trying to guess which sectors of the market will recover the soonest, this index fund invests in all sectors of the economy.
Keep in mind, an investment strategy, in order to be optimal, needs to be part of an overall strategic financial plan. Otherwise, all you have our tactics in search of a strategy.